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For more information on VPNs, read the excellent article in HowStuffWorks.

(not Netscape friendly)

Virtual Private Networks

Instead of simply dealing with local or regional concerns, many businesses now have to think about global markets and logistics. Many companies have facilities spread out across the country or around the world, and there is one thing that all of them need: A way to maintain fast, secure and reliable communications wherever their offices are.

Traditionally, this has meant the use of leased lines to maintain a wide area network (WAN). A WAN (see sidebar) has obvious advantages over a public network like the Internet when it came to reliability, performance and security. But WANs are expensive. The cost rises as the distance between offices increases.

As the popularity of the Internet grew, businesses turned to Intranets (sidebar) . Now, many companies are creating their own VPN (virtual private network) to their networks to remote employees and distant offices.

Basically, a VPN is a private network that uses a public network such as the Internet to connect remote sites or users together. Instead of using a leased line, a VPN uses "virtual" connections routed through the Internet from the company's private network to the remote site or employee.

A well-designed VPN can:

Improve security
Reduce operational costs versus traditional WAN
Reduce transit time and transportation costs for remote users
Improve productivity
Provide global networking opportunities
Provide telecommuter support
Provide broadband networking compatibility
Provide faster ROI (return on investment) than traditional WAN

Most VPNs use a process called "tunneling":

The company's VPN server creates packets for the Internet that consist of the message inside a company packet (company network routing information) which has been encrypted. The encrypted company packet is encapsulated inside a standard Internet packet. This package is sent over the Internet to the destination VPN server (or desktop computer).
The receiving VPN server opens the Internet package, extracts the company packet, decrypts it, and routes it to the appropriate recipient.
The protocols for the internal packet don't have to conform to standard Internet protocols, which improves security.

Nothing requires either end of the conversation to have a dedicated VPN server. One of the parties may be a company employee working from home or a sales representative on the road working on a laptop in a hotel room.

WAN's

Wide area networks are an outgrowth of Local Area Networks (LANs).

If a business has multiple offices located across town or in different cities or states, it almost always has to lease high-speed telephone lines from the local phone company or a long-distance carrier.

WAN's are probably the most secure way to extend a company's network under these conditions.

However, leased lines are expensive, especially if the office are located across the country from each other.

Intranets

An Intranet is the use of Internet technologies within an organization (or company) to achieve better results than the conventional means of data access and transfer. Intranet helps in cutting costs, easy and fast accessibility of day to day information.

In other words, it looks like the Internet, but stays inside the organization. It can provide access to the Internet, but the Internet can't access the Intranet.